The global shift towards clean energy and electric vehicles (EVs) is accelerating, aiming to combat climate change and promote sustainability. This transition relies heavily on critical minerals like cobalt, graphite, and lithium, essential for EV batteries. Addressing tariffs on these minerals can enable developing economies to diversify their exports and advance up the value chain.
Clean energy technologies require a variety of minerals. Solar power uses copper, aluminum, cadmium, tellurium, and selenium, while wind power needs copper, rare earth elements, chromium, zinc, and aluminum. EVs and their batteries require aluminum, copper, cobalt, graphite, nickel, lithium, manganese, and rare earth elements. The demand for cobalt, graphite, and lithium, abundant in developing economies, is expected to increase fivefold by 2050 due to their intensive use in new energy technologies.
The EV value chain for cobalt, graphite, and lithium includes five stages: raw mineral extraction, mineral processing, electrode production for batteries, battery manufacturing, and EV production. Tariffs on products related to the EV value chain vary across different processing stages and economies. Generally, tariffs on battery packs and EVs are higher than those on raw minerals and battery materials, indicating tariff escalation up the value chain. Developed economies typically have lower tariffs across all stages but apply the highest tariffs on processed and finished goods, providing an opportunity for developing economies to move up the value chain.
To capitalize on the demand for critical minerals, developing economies can attract investment in refining and processing facilities and enhance technology transfer to improve local capabilities. Ensuring fair distribution of the benefits from mineral trade by strengthening governance and adopting sustainable practices is also crucial. Addressing tariff escalation and fostering sustainable development in the critical minerals sector can lead to structural transformation in developing economies, creating a more level playing field and improving living standards.
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